weekend update


A nasty week in many markets worldwide. The week started off with a gap down opening after closing last week at SPX 2075. It had another gap down opening on Tuesday, then a third gap down on Wednesday hitting SPX 2024. Thursday the market reversed the volatility with a gap up and hit SPX 2056. Then Friday resumed the turbulence to the downside with another gap down opening, and market ended the week at its low SPX 2002. For the week the SPX/DOW lost 3.65%, the NDX/NAZ lost 2.65%, and the DJ World index lost 3.60%. Economic reports for the week were biased to the upside. On the uptick: wholesale/business inventories, retail sales, consumer sentiment, the WLEI, plus weekly jobless claims and the budget deficit improved. On the downtick: export/import prices, the PPI, and the monetary base. Next week lots of action. Highlights include the FOMC meeting, Industrial production, Housing, and Options expiration.

LONG TERM: bull market

Two weeks ago we presented three potential long term counts and posted them on the SPX/DOW/NAZ charts. We gave the probabilities of each of these counts a 40%-30%-30% rating. Last week we discussed the five longest bull markets going back to the year 1885. Three of which have occurred during the last three bull markets, with the current one the third longest in history. We also noted, and gave our Fibonacci reason, should the market make all time new highs in 2015 it will likely make all time new highs in 2017 as well.

Naturally, we will have to wait until at least next month to see if the latter occurs. However, based upon additional historical analysis we are upgrading the count posted on the SPX charts to 50%, leaving the count posted on the DOW charts at 30%, and downgrading the count posted on the NAZ charts to 20%. Since both the SPX count and DOW count suggest Primary V, to end this bull market, is not underway yet. This allows us to expect new highs in 2015, maybe in 2016, and possibly in 2017 as well. We have already worked out a potential scenario going forward. However, we will have to see what unfolds during the next month or so before going public with it.


For now the weekly SPX chart displays our favored wave count of an extending Primary wave III. You will notice Primary waves I and II ended in 2011, and Primary III is already three years long. This count suggests Intermediate v/Major wave 3 may have topped at the recent SPX 2079 high in December, and possibly Major wave 4 is underway now. Should Major wave 4 be underway, we would expect a correction similar to Major wave 2 (10%). However, since this Primary wave has had a tendency to keep subdividing we cannot rule out a smaller correction, like only 5%, if Intermediate wave v subdivides.

MEDIUM TERM: downtrend underway

From the Intermediate wave iv downtrend low at SPX 1821 in October, we counted five Minor waves up into the recent high at SPX 2079: 1898-1878-2046-2030-2079. We observed Minor wave 1 as a simple wave. Minor wave 3 divided into five waves of its own: 2024-2001-2041-2032-2046. Then a choppy Minor wave 5 with two potential patterns. The first of these two patterns looked like a diagonal triangle. The second, a complex pattern which we displayed on a five minute chart last week. Under either scenario we determined that the SPX 2050 level was important support for the uptrend. And, SPX 2066 would be important support for the complex Minor 5 pattern.


On Monday, this week, the market gapped down at the open, then broke through the first important level (2066) about halfway through the session. This was the first warning of a potential uptrend top at SPX 2079. On Tuesday the market gapped down again, breaking through the important SPX 2050 level right at the open. We then started tracking the price movement as if a downtrend was underway. Thus far, the market has nearly fully retraced the entire advance from early November into early December (2001-2079), in just one week, when it hit SPX 2002 on Friday. The downtrend underway scenario looked quite convincing at that point, and it was confirmed. Medium term support is now at the 1973  and 1956 pivots, with resistance at the 2019 and 2070 pivots.


Our upside target for this uptrend was met a bit more than two weeks ago when the SPX hit the 2070 pivot. We had calculated some time ago the uptrend should top within the 2070 or 2085 pivot ranges, with the Fibonacci cluster at SPX 2078 to 2084 as most likely. With the uptrend topping at SPX 2079, Minor 5 (2030-2079), during this uptrend, was a near perfect 0.618 relationship to Minor 1 (1821-1898).


This week we posted a tentative green Major wave 3 label on the SPX hourly chart at SPX 2079. As the expected downtrend started to unfold we started labeling the waves as if it was a Major wave 4 correction. Thus far we have observed five waves down to SPX 2034 and labeled it Minute wave a. Then a Minute wave b rally to SPX 2061. This was followed by a straight down decline to SPX 2024 to end Minute wave c/Minor wave a. We then had a three wave rally to SPX 2056 for Minor wave b. After that Minor wave c was underway.

Thus far we have counted five waves down to SPX 2012, Friday’s low, and labeled it Minute wave a. From that low Minute wave b should have been underway. But the rally only carried to SPX 2025, well short of expectations for a Minute b. Then the market headed lower, dropping through SPX 2012, and hitting 2002 at the close. Now it looks like wave 1 of Minute a was five waves to SPX 2012, wave 2 rallied to 2025, and wave 3 of Minute a is underway. This short term pattern suggests Minute a could hit the 1973 pivot range before ending. A Minute b wave rally should then follow, possibly back to the 2019 pivot range, then a Minute c wave decline to end Minor c/Intermediate A. If Intermediate wave v is subdividing, the last low, expected to be Int. A, could be the end of the correction. Under either scenario, a fairly decent rally should follow the next important low. Short term support is at the 1973 and 1956 pivots, with resistance at SPX 2019 and 2070. Short term momentum ended the week oversold, with a potential positive divergence.


Asian markets were mostly lower for a net loss of 2.0%.

European markets were all deeply lower for a net loss of 7.9%.

The Commodity equity group were also solidly lower for a net loss of 8.2%.

The DJ World index is down trending and lost 3.6%.


Bonds are still down trending, but gained 0.9% as yields are down trending too.

Crude remains in a downtrend and lost 12.4% on the week alone.

Gold is up trending and gained 2.5% on the week.

The USD looks like it is headed into a downtrend as it lost 1.2% on the week.


Monday: the NY FED at 8:30, Industrial production at 9:15, then the NAHB at 10am. Tuesday: Housing starts and Building permits. Wednesday: the CPI and the FED ends its FOMC meeting. Thursday: weekly Jobless claims, the Philly FED, and Leading indicators. Friday: Options expiration. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp




About tony caldaro

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308 Responses to weekend update

  1. simpleiam says:

    Stocks holding up very well for an over 4% drop in WTI/break of $56. Could it be that the big boys think this particular leg down in crude is almost over? Think it’s a distinct possibility. Indicators looking pretty oversold. GL All!

  2. Japanese PMI coming at NY Time11:30PM, hell!!! Anything that can go wrong will definitely go wrong

  3. mjtplayer says:

    Tony – what do you make of the crash in the Ruble, .RSX and Russian gov’t bonds? Another 1998 Russian default ahead for P4?? Back then, Russia and their economy were small relative to world GDP; today they are much larger.

    Russian gov’t 6mo notes trading at yields of 15.25%, that’s 200bps over the 10yr yield of 13.25%!!! Not good, not good at all. The Ruble is getting smoked today, largest 1-day drop since 1998. The .RSX is crashing, down 12% today and over 35% in 3 weeks.

    • tony caldaro says:

      We have been expecting this.
      Do not see any reason for a default.
      But it would not surprise me to see Putin pull that sort of nonsense just to get attention, create havoc in western markets, and then blame the west =)

  4. fibs-R-us says:

    There will be a small re-balancing of the S&P after the close today. Just a hand full of stocks taken out and replaced by a few others.

  5. fishonhook says:

    Been throwing my last bit of short over board . Nice to be in the green again.
    Have a little smatter of EEM and other shorts in case Rabbit is right. But Fed days are always volatile up and down and shakes many people out. Better to fade the trend near the EOD. Good luck to all

  6. stcoleridge says:

    Hi Tony, was your WTI target $54.65? Also what does the horizontal light blue line on the WTI weekly chart represent?

  7. fionamargaret says:

  8. My model will turn BUY provided SPX does not close below 1978. Today, SPX closing below 1978 is unlikely. Even with HO signals, crash in oil, currencies crashing, if the market is holding…that it self is bullish sign though in SHORT TERM.

  9. ramdigitaldoc says:

    According to my charts, we hit an almost exact 38.2% retracement of the advance from the October lows in the S&P to 2079, at today’s low.
    Reason for the bounce?

  10. klopharmd says:

    Anyone see those Vix ticks? Saw 20.5 to 23-24.5 and back down 3 times now. Could just be CNBC app.

    • mjtplayer says:

      Not CNBC, those were spikes in the spot .VIX

      The front month and Jan futures saw small spikes, but not to the degree of the spot.

      You’re getting close to a low of some type, VIX spot this morning was trading well in excess of the front month futures and the curve was flat but partially inverted in some contracts – got close to panic this a.m. but would like to see more backwardation in the term structure, still pretty flat.

  11. My model has turned neutral at 17190 of INDU. I am long now at 17204 and SPX at 1991 GL all

  12. llerias7 says:

    If there is some sort of manipualation in this then must be some kind of xmas rally…may be a counter trend up move begining next FOMC…

  13. ramdigitaldoc says:

    Hi all,
    Still a newbie but have a question.
    I know the day is not over, but if the market climbs into positive territory, could that have been the minute a low?
    Thanks all

  14. rc1269 says:

    well now that those pesky Europeans are gone for the day we can put our rally hats back on!

  15. spindoc73 says:

    Small cap correction looks to be over already. Good long entry with stops at (today’s lows – x*SD)

    • mjtplayer says:

      With the mid $114 area broken on the IWM, H&S pattern says $110 – $111 downside target. Today’s low near $113, getting close but I think you’re early

  16. scottycj1 says:

    Went short again at 1995

  17. lunker1 says:

    Int A?
    pivot 1973
    thinking ahead……
    I’ve got a fib cluster at 1950. maybe Major 4 target.
    bottom of 1956 pivot

    reverse engineering targets for Int B

  18. smugtwo says:

    I have been following this page for over a year and a half and just started posting today, Tony thanks for everything you do. Unsure if this mornings early move up could count as an Minute B, and we are currently in Minute C or is this just an ongoing minute A?

  19. scottycj1 says:

    Looks like the 1986 support could hold for a bit…..covered a few look to re-short 1994/95

  20. MISSION Accomplished
    -10% down on XLE from post
    1983 SPX

    Darkness (@SirDarkness) says:
    December 4, 2014 at 10:27 am
    To all the people thinking they are buying a low in energy names. WAIT or short.
    The second dip buyers are the weakest.
    Just wait..tax loss selling in energy. Here is the key *******The hi yld energy bids will start to evaporate /really pissing off accounts ******. Same old crap
    You know firms won’t want to bid these bonds( they dont want them on their books either into yearend)…only knocking them down further adding to lower equity. Things like $xle have another 10% down ..micro -mid cap names 20-30%. Thing like SLCA , i have been short from 61- to easy to cover . The small names still have much further to go. They are only in the PR stage of thinks are ok.Then you will hear about the margin calls from execs…it’s so easy yet , hard to do because they are down. I guess that would spill over to spx , maybe 1983 –
    Wall st never changes

  21. seeing now this Biotech nosebleed divergence with Energy playing out. As we thought, this is wave 2 of Primary 5…. 1980 was the first pivot at 38% of 1… Biotech gettting slammed as it should…

  22. H D says:

    This hit brought to you by the 2019 pivot. How big was A of IV?

  23. tradeanimal says:

    Stop loss triggered on SPY Jan calls. No Hoorah (!) today. Will look for better entry later today.

  24. mjtplayer says:

    Anybody want to buy some Venezuelan 2yr notes? Trading $0.39 on the dollar, with 11% coupons – YTM of over 70%. That implies a 98% probability of default BTW….

    2 more countries who’s yield curve are inverted, yields blowing-out and CDS rising? Greece & Russia. Not nearly as bad as Venezuela, but awful in their own right and falling everyday.

    Also, another day another 52-week low in junk bonds.

    Those with questionable credit are getting re-priced: junk rated corporate, EM and distressed. It appears the market will no longer look the other way to shady credit and risk will now be priced accordingly. If that’s the case, get ready for defaults in the years ahead….

  25. gtoptions says:

    Thanks Tony
    SPY ~ WS2 @ 198.79 ~ 138.2% ‘a’ @ 198.53
    GL & Happy Holidays

  26. elmer510 says:

    Today’s poem:
    How low
    can it go.

    Personally I guess 1981 before IM B.
    Then c = a*1,38

  27. John Arella says:

    spx updated count 1-2 1-2 3rd wave to down side coming 🙂

  28. rc1269 says:

    key trendling support here on spx. IHS or bust. we should know soon

    europe saying bust, for the time being

  29. mjtplayer says:

    Gap-up opening is fading fast, looks like a b wave rally of some degree, perhaps minute or minutte. LL ahead, either today or tomorrow closer to the 1,973 pivot area.

  30. Torehund: You make an interesting case for being bullish on Euro, but I believe the dollar bull market has only made it’s first upleg and has much further to go. In that kind of a condition, I don’t see how the Euro can do that well.

    • torehund says:

      I have recently changed my view preliminary based on the chart I posted and my thinking that the Euro-zone is entering a deflationary spin. America is entering an inflationary environment (just starting). Based on the value aspect of a currency, Euro could therefore emerge as attractive. I am not at all sure, however its something to have in mind, and it fits With rising markets. It would imply that the dollar has one more leg to go Down before an extended bullmarket. So the dollar bull could be skewed forwards to 2016/17, coinciding With the start of a new global bear market in Stocks. This also implies that gold can start running from here and that its wave 4 bottom in this metal we now are seeing (on a large scale). And maybe Harvey Organ is right, he is a dedicated specialist on metals.

  31. ko68 says:

    Thanks, Tony. Does an opening session today with 15 handles up indicate INT B in progress?

  32. scottycj1 says:

    Daily Resistance 2018 and 2009
    Daily Support 1986 and 1973 12-15 8:12 ET

  33. chrisk44342 says:

    premarket observations

  34. blackjak100 says:

    Tony I think you were correct in seeing 5 waves down 2056-2012. Then 3 waves up to 2025 and now a clear 3 waves down to 2002. Are we seeing an expanded flat for wave ii of 3 (3-3-5)? The b wave is 165% of ‘a wave’ which is concerning but not unheard of. The target for the c wave would be 2030-2035. Let’s see how NYAD performs during this climb.

  35. pooch77 says:

    Big up is here up 15 handles….

  36. bouraq says:

    Start of the week charts:
    $spx $djia $rut $dax $audusd $eurusd $gbpusd $oil $gold http://www.tradingchannels.co.uk/2014/12/start-of-week-charts.html

  37. fotis2 says:

    Crude looks like its gaining traction turnaround Monday?

  38. rc1269 says:

    The reason why Abe called a snap election is because victory was all but a certainty. Anybody who expects the markets to be surprised- positively or otherwise- hasn’t been following the storyline. IMO

  39. rabbittrader1 says:

    Still looking for about 20% drop from 2079 high in SPX by Dec 24th to 1695 or so. R good night.

  40. rabbittrader1 says:

    torehund, I must differ with your number regarding solar power It is now about 1% and growing rapidly . In 15 years it is projected by some (including me) to be 15% of electricty production.. This says nothing about wind power and fuel cell technology. Nuclear power has very high capital costs and with Fukishima (Japan,) meltdowns, Chernobyl and 3 mile Island there is reluctance to build (some will) All this plus electric cars will have an impact on oil, coal and even Nat Gas usage despite lower oil cost. For example, I bought Solar Power Nevada ,SOPW, at $0.32 this summer . It is now $ 2.39 (up 39 cents Friday) despite dropping oil price. Photovoltaics cost $75 per KWH a few years ago Solar panels now cost less than $1.00 per KWH (made in China). Sun power is FREE ! It is being installed in the Northeast both residentially and commercially. like hotcakes!

    • torehund says:

      Sure solar has a future, but the bulk of energy Will come from nuclear when fossil fuels decline.

    • aultraman says:

      I do agree solar is the way to go, at least in the sunny California. My friend just had panels installed on his roof – all free of charge. He is paying the solar company a month fee, plus a small fee to the local utility (PG&E). His monthly bill was $200+ before and now $60+. It was a no brainer for him to switch.

      What I wanted to ask was, what will make oil be down all the way to $25 in 2016? Is that just purely TA? It’s hard to fathom oil being down so much in a couple of years, even thought it’s barely at $60 now.

  41. pooch77 says:

    Looks like a 10 handle gap up,dont think we will see the Bunny Rabbits 600 point dow drop

  42. opader says:

    Thank you Tony. My count puts SPX at SC3, C1, P3, M5, I2. I2 is doing a classic ABC correction 2079-2024-2055-1966 (Leg C is 1.618*Leg A, we should see 1966 by Tue or Wed).


  43. rabbittrader1 says:

    Any of you guys prognosticating on the price of crude oil ever been in the Oil and Gas Business? I worked with Ken Crandall former V.P Exploration for Standard Oil Co.’ I took a course on “Risk Analysis of Oil and Gas Exploration. I did a major report for General Dynamics on ENERGY, in the mid 60’s. I analyzed many Oil co.s and Drilling co’s and acquired an Oil exploration and production company My forecast of a temporary bottom at $54 (and change). . should hold as US drillers continue to cut back on drilling .This wave 3 bottom will be followed by a wave 4 correction over the next 3 to 4 months to about $84 (with a short move to $91 possible. This will be followed by a slow wave 5 down into the year 2016 to $25 per barrel. Despite this. solar, wind, fuel cells etc, will do well because the world is realizing that fossil fuels MUST be phased out. for the good of the planet and human survival R

    • torehund says:

      Rabbit, the thinking that you have to get rid of something thats polluting is a positive, however to achieve this, the price of oil has to be elevated for a prolonged time(to make alternatives a viable options). Whats happening now is the opposite. Lets face it we are addicted to fossil fuels and the only alternative today is green Nuclear power. Wind, solar constitutes less than 1/1000 of overall energy consumption and even if it rises 10 times its just one percent of the total. Its just wishfull thinking form the politicians, and it is news that sell. When someting is excessively bullish its prone to flash crashes, and thats what you have seen in oil. This is an opportunity for the oil companies to lay off workers and slim Down the organisations. I am invested in Green energy through Nuclear exposure, the Choice of China for decades to come.

  44. scottycj1 says:

    Japan now down .0085….so much for the election…8:54 ET

  45. fishonhook says:

    No big up or big down
    Flat so far

  46. pooch77 says:

    Looks like a nice gapper to the upside

  47. sibyn says:

    My roadmap 1820>1950>1611.

  48. John Arella says:

    With comments like this I can see the DJIA tumbling to 15,000-15,500 very quickly and confirming P4 or worse happening, oil will probably bottom when we hit that level.


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